Bond strategists: Fed terminal rate to reach just under 5% – Reuters poll

Sovereign bond yields are likely to remain elevated in the near term and be at higher levels in a year than predicted last month,” per the latest Reuters survey of fixed income strategists. “The bond strategists expected a terminal Federal Funds Rate just under 5%,” the poll adds.

Key findings

The median forecast from over 30 bond strategists who answered an additional question in the Nov. 4-9 poll put the terminal fed funds rate at 4.75%-5.00%, with one forecast as high as 5.50%-5.75%.

That median view was one quarter percentage point higher than what economists expected in a separate Reuters poll, but slightly lower than what interest rate futures were pricing in.

A strong 74% majority, 23 of 31, expected the terminal rate to be reached by end-Q1 2023. While six said Q2, two chose Q4 of next year. The bulk of responses were taken before any results from the US midterm elections were available.

Also read: Forex Today: Looking for safety ahead of US CPI